Queensland Economic Advocacy Solutions

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Does your business feel compelled to donate to the major political parties?

Does your business feel compelled to donate to the major political parties or attend a particular political party event?  If so, you’re not alone.

Recently the Grattan Institute studied political donations in Australia and confirmed what many know to be the case.  If you want to do business sometimes you feel obligated to reach deep into your pocket and hand over cash to the major political parties.

Is it necessary? Well in theory no it is not, yet so many businesses across Queensland feel it to be a must. This grey area is discussed in detail in the Grattan report and four key points can be discerned:

  • Queenslanders and Australians are concerned about the power of special interest groups;
  • Groups with the most to gain contribute more and accordingly get more access;
  • Relationships with politicians matter and can be bought through donations or attending functions; and
  • Access can lead to influence.

Key quotes from the report include:

"Australians are rightly concerned about the role of special interests in politics. Even a healthy democracy like Australia’s can be vulnerable to policy capture. Well-resourced interests – such as big business, unions and not-for-profits – use money, resources and relationships to influence policy to serve their interests, at times at the expense of the public interest. Even if they are only sometimes successful, it’s not the ‘fair go’ Australians expect.

Access to decision makers is vital for anyone seeking to influence policy. But some groups get more access than others. Businesses with the most at stake in government decisions lobby harder and get more meetings with senior ministers.

Money and relationships can boost access: time with ministers and their shadows is explicitly ‘for sale’ at fundraising dinners, and major donors are more likely to get a meeting with a senior minister. And more than one-quarter of politicians go on to post-politics jobs for special interests, where their relationships can help open doors.

Donations build relationships and a sense of reciprocity. And the fact that industries in the cross-hairs of policy debate sometimes donate generously and then withdraw once the debate has moved on suggests they believe, perhaps rightly, that money matters."

I do not necessarily agree with everything in the Grattan report but it certainly makes for compelling reading. The report can be found here

NSW fires latest salvo in tax competitiveness war

Competition is a beautiful and ruthless concept.  It is a situation in which two or more people or groups are trying to get something which not everyone can have.  In the business world this is predominantly market share. For State Governments competition is better known as competitive federalism whereby each State Government is in fierce competition with each other to retain and attract business investment or people to their state.

The main area in which State Government’s compete is to have the most attractive business operating environment determined by both tax and regulatory settings. This week New South Wales Government have launched the latest salvo in the tax competitiveness war in adjusting their stamp duty arrangements. 

NSW Treasurer Dominic Perrottet has announced that current stamp duty brackets will be indexed at CPI for all property transactions. NSW will be the first state or territory in Australia to index Stamp Duty brackets to CPI and it represents the first major change to stamp duty in over 30 years. Under the changes the price bands, or brackets, which determine how much stamp duty is paid will start to rise with inflation from the middle of next year. Transfer duty is charged at various rates on the transfer of real and business property with rates for both NSW and Queensland below.

The tax reform will cost the state budget about $185 million in the three years after the changes take effect on July 1 next year. The indexation of rates will give buyers modest savings initially but will, over time, ensure no repeat of the current situation where stamp duty is a barrier for first home buyers, up sizers and right sizers.  It will ensure that the stamp duty cost for commercial properties will also be moderated encouraging investment and market mobility. To illustrate, Mr Perrottet said that if the state’s stamp duty brackets had been indexed when they were introduced in 1986 someone purchasing a $1 million property today would pay around $80,000 less in stamp duty.

The reason QEAS has covered this development is that unless Queensland matches this initiative in our 2019-20 State Budget, investors may look to NSW as a more attractive jurisdiction, thereby threatening Queensland investment.  The pressure will be on Treasurer Jackie Trad to consider this latest development.

Key points:

  • NSW Stamp Duty Brackets will be indexed at CPI
  • change will apply to all property transactions in NSW
  • First major change to stamp duty in 30 years
  • Will affect transactions made on or after 1 July 2019.

Anticipating Queensland’s Future Skill Needs

Jobs Queensland have released a very interesting report ‘Anticipating Future Skills: Jobs growth and alternative futures for Queensland to 2022.

It provides an evidence base for consideration of Queensland’s future skills needs that has been developed in consultation with industries and regions across Queensland.

More than 50 per cent of all new workers are projected to be employed in just three industries: Health Care and Social Assistance; Professional, Scientific and Technical Services; and Education and Training.

This reflects a continuation of a trend towards high levels of growth in service based industries and the occupations that underpin these industries. This project also provides projections of future qualifications in the Queensland labour market.  The workforce is projected to become more educated, with a clear shift towards higher levels of skill acquisition.

These projections can play a key role in informing decision making by government in VET investment, and skills and training policy more broadly. The outcomes from this project can also support industries and regions to consider and plan for the future workforce needs within their domains.

QEAS notes the baseline scenario which includes assumptions about the economy, the labour market and population and productivity growth, developed around the Queensland Government’s 2017–18 Budget Papers and other state government data.

Key results under the baseline scenario include:

·       It is projected that more than 50 per cent of all new workers will be employed in just three industries — Health Care and Social Assistance; Professional, Scientific and Technical Services; and Education and Training. 

·       Regions with the highest proportion of service industries are projected to see the greatest growth in employment, with the majority of growth in the south east corner. 

·       Professionals will remain the largest occupational grouping and are projected to grow strongly, as is the Community and Personal Service Workers group.

·       Under the baseline scenario, the Queensland employment is projected to grow by almost 190,000 jobs between 2017 and 2022, resulting in almost 2.6 million persons employed.

·       Growth in industry employment is varied. Employment in Health Care and Social Assistance is projected to grow strongly over the five years to 2021–22 and is projected to remain the largest employer, increasing its share of Queensland employment from 13 per cent in  2016–17 to 14.5 per cent in 2021–22.   

·       Employment in Information, Media and Telecommunications is projected to fall over the five years to 2021–22.

A link to the report is provided here.

Why is infrastructure so challenging for Queensland

Infrastructure plays a crucial role in determining the strength of current and future economic growth in Queensland. However the roll out of infrastructure ahead of or even on the curve of requirement has proved profoundly challenging for all three tiers of government and successive governments.

There are three main reasons for this: higher economic growth; higher population growth; coupled with a significantly greater geographical area and decentralised population and economy. QEAS takes a look at these drivers.

Queensland has undoubtedly been one of Australia’s success stories in terms of its economic growth only being surpassed by Western Australia over the past 25 years.  Queensland’s gross state product has grown by nearly 170 per cent to now be a $327 billion economy in 2016-17 prices.  This compares to national growth over the same period of 125 per cent.  Growth in recent years for the Sunshine State has been somewhat subdued but Queensland Government estimates have growth increasing from 1.8 per cent in 2016-17 to 2.75 per cent in 2017-18 and 3.0 per cent in 2018-19.  Whilst these forecasts remain under the 25 year long term average of 4 per cent (3.3 per cent nationally) the anticipated economic growth will require continuing higher levels of infrastructure renewal and capacity than at present.

Over the past 25 years Queensland’s population growth has grown by 63 per cent significantly above the national rate of 40.7 per cent and has been the highest of all States. Population flows towards economic and employment opportunity and as our economy has grown generating jobs our population has swelled. Furthermore forecasted population over the next 25 years indicates that Queensland’s population will continue to grow well above the national average giving rise to continuing higher levels of infrastructure investment.  Depending upon growth scenario (Series A: high and Series B: moderate) ABS estimates Queensland’s population to grow by between 48.1 to 62.5 per cent and compares to the national average of between 39.9 to 50.8 per cent.

The third reason why infrastructure has proved so challenging for Queensland relates to the geographic size of our State coupled with our decentralised population and resulting lower population densities.  The size of the challenge for the three tiers of Government is evidenced in the following table.  In short the land area, regional populations, road network, rail network, number of airports, number of ports, dams, water pipelines, water treatment plants and length of transmission and distribution electricity networks necessitate a significant and higher level of investment historically, currently and into the future.

In summary, in order for the Sunshine State to continue to grow and prosper unhindered, it will be essential that not only new infrastructure investment occurs but better cooperation, planning, construction and maintenance also occurs across all three tiers of government.

Queensland Workplace Accident Statistics 2017-18

The 2017-18 WorkCover Annual Report contains very good summary statistics on Queensland accidents in the workplace. These are provided below:

The big dilemma over WorkCover Queensland

There is a huge decision that the State Government is going to have to make in relation to WorkCover Queensland.  So what is it?

WorkCover is a success story for all other Australian jurisdictions to follow.  WorkCover’s Annual Report for 2017-18 released earlier this month highlights what a fantastic financial position it is in.  Key points that can be discerned:

  • For the fourth consecutive year, WorkCover offered Australia’s lowest average premium rate at $1.20 per $100 of wages and for 2018-19 Queensland employers will continue to enjoy this rate. This is in addition to an ongoing apprentice discount and increased early premium payment discount of 5%;
  • WorkCover’s operating profit for 2017–2018 was $324 million after tax;
  • The net return on investments for the year was 7.56% (2016–2017: 9.96%);
  • WorkCover premium revenue was $1.451 billion for the year, increasing from $1.416 billion in 2016–2017 due to a larger Queensland workforce;
  • Net claims incurred were $1.322 billion for 2017–2018 (2016–2017: $1.264 billion); and
  • WorkCover is currently achieving both its legislative requirements and management’s aim of maintaining a funding ratio of at least 120% currently at 181%.

Through the hard work of progressive governments, Queensland’ workers compensation scheme is regarded as the best performing in Australia not only in terms of solvency but in delivering the lowest average premium for businesses now and across the past 10 years.  At the same time the benefits delivered to injured workers and their families across this period have also been regarded as both fair and reasonable. 

2010 reforms, which limited the size of common law payouts have brought greater balance to the workers compensation scheme in Queensland. These reforms have undoubtedly had a positive impact on average premiums payable by employers through the scheme, which ultimately encourages business in Queensland to invest in their business and employ more staff.  Queensland’s historically low workers’ compensation premiums have been a central element in our State’s efforts to keep our business operating environment competitive. 

However, the big question that needs to be resolved is what is the State Government going to do with this rapidly accumulating pot of WorkCover money.

In 2017-18 WorkCover had $5.467 billion in assets and only $3.026 billion in liabilities with a funding ratio of a whopping 181 per cent.  This has steadily risen since 2014-15 from 157 per cent.  To give an illustration of the cash available that can be put to use elsewhere, reducing the funding ratio to 120 per cent, which is the statutory requirement, would free up $1.836 billion.  Reducing it to WorkCover’s unofficial floor of 140 per cent would still free up $1.231 billion.

My fear is that this money will progressively become too tempting for a financially constrained State Government to ignore.  We only have to cast our minds back to the raid on public servant superannuation to see an example of ‘lazy capital being put to better use’.  Queensland employers need to get on the front foot on this issue and quickly as it is their money.

Option one would be to argue for a further reduction in premiums.  This has merit in terms of assisting business at a time when many other operational costs are increasing and enhancing competitiveness.  However, we already have the lowest premium in the country, and there is some merit to the argument that a price (or financial incentive) has to be placed on valuing safety.

The second option would be additional funding be allocated (over on top of existing funding from Workplace Health and Safety Queensland paid for by general taxes and revenue) for initiatives to improve safety outcomes in Queensland workplaces such as the very successful Injury Prevention and Management (IPaM) programs. 

I will take guidance from readers on what their preferred option is. But the key point is this ……. if Queensland businesses don’t start to get vocal about this issue they run the risk to the money being put to use in a manner that does not deliver a ROI in the area of workplace safety or business competitiveness.

The Queensland Productivity Commission should examine the economic benefit of daylight saving

With the risk of alienating die-hard opponents of daylight saving I believe the State Government should commission the Queensland Productivity Commission to examine the economic cost of the Sunshine State not having this initiative.

This coming Sunday - New South Wales, Victoria, the ACT, South Australia and Tasmania will all shift their clocks forward with the commencement of daylight saving summer hours.  This in no uncertain terms creates an economic cost of inconsistency of hours across the eastern States for Queensland.

It is ludicrous that both sides of State politics are unwilling to examine the merits of Queensland adopting daylight saving.  This is a classic example of whereby both parties are putting politics before the sensible debate of an initiative that could realistically create significant benefit for our economy and many jobs . Let me explain ………..

The issue of daylight saving has typically been a difficult one for the State’s business community just like for all Queenslanders. Historically businesses in SEQ are more inclined to support its adoption and businesses in regional Queensland are more inclined to oppose it.  Previous research I have overseen indicates that Statewide, business support sits at about 62% with this support increasing to 82% in SEQ.

Queensland businesses view this issue not just as a lifestyle one but as an economic one with significant costs existing.  These take the form of:

  • For tourism businesses the visitor experience is diminished and visitor spend is less in the early daylight hours of each day than in evening daylight hours;
  • Queensland businesses have to open earlier to be unison with the southern states incurring additional wage and other operational expenses;
  • Business travellers have to travel the evening before for meetings in the southern states incurring accommodation and meal expenses;
  • Gold Coast business experience special cross-boarder difficulties with the Tweed.

Whilst the majority of Queensland businesses support the introduction of daylight saving the introduction of two time zones within Queensland would be equally problematic and would create significant difficulties for businesses statewide. The adoption of two time zones would simply shift the cost impacts of not having daylight saving from SEQ to Regional Queensland but at the same time are thought to significantly exacerbate the financial impact of this issue.  However, this theory that I have long articulated, needs to be properly tested.

I would like to see the State Government commission detailed economic research on this issue.  This study would establish the economic cost of Queensland not aligning with eastern Australia because of the absence of daylight saving. The Queensland Productivity Commission should examine the cost or benefit of Queensland adopting daylight saving and the cost or benefit of just SEQ.  Only with informed research can we decide whether the cost is too great for Queensland not to have daylight saving.

Interim Report of the Financial Services Royal Commission

The executive summary of the Interim Report of the Financial Services Royal Commission is provided below:

The Commission’s work, so far, has shown conduct by financial services entities that has brought public attention and condemnation. Some conduct was already known to regulators and the public generally; some was not. Why did it happen? What can be done to avoid it happening again? These are now the key questions. 

In this Interim Report these questions – ‘why’ and ‘what now’ – are asked with particular reference to banks, loan intermediaries and financial advice, with a view to provoking informed debate about both questions. 

Why did it happen?

Too often, the answer seems to be greed – the pursuit of short term profit at the expense of basic standards of honesty. How else is charging continuing advice fees to the dead to be explained? But it is necessary then to go behind the particular events and ask how and why they came about. 

Banks, and all financial services entities recognised that they sold services and products. Selling became their focus of attention. Too often it became the sole focus of attention. Products and services multiplied. Banks searched for their ‘share of the customer’s wallet’. From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales. 

When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done. The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court. Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct. Infringement notices imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a ‘community benefit payment’, but the amount was far less than the penalty that ASIC could properly have asked a court to impose.

What can be done to prevent the conduct happening again?

As the Commission’s work has gone on, entities and regulators have increasingly sought to anticipate what will come out, or respond to what has been revealed, with a range of announcements. These include announcements about new programs for refunds to and remediation for consumers affected by the entity’s conduct, about the abandonment of products or practices, about the sale of whole divisions of the business, about new and more intense regulatory focus on particular activities, and even about the institution of enforcement proceedings of a kind seldom previously brought. There have been changes in industry structure and industry remuneration. 

The law already requires entities to ‘do all things necessary to ensure’ that the services they are licensed to provide are provided ‘efficiently, honestly and fairly’. Much more often than not, the conduct now condemned was contrary to law. Passing some new law to say, again, ‘Do not do that’, would add an extra layer of legal complexity to an already complex regulatory regime. What would that gain? 

Should the existing law be administered or enforced differently? Is different enforcement what is needed to have entities apply basic standards of fairness and honesty: by obeying the law; not misleading or deceiving; acting fairly; providing services that are fit for purpose; delivering services with reasonable care and skill; and, when acting for another, acting in the best interests of that other? The basic ideas are very simple. Should the law be simplified to reflect those ideas better?

This Interim Report seeks to identify, and gather together in Chapter 10, the questions that have come out of the Commission’s work so far. There will be a further round of public hearings to consider these and other questions that must be dealt with in the Commission’s Final Report.

Small businesses continue to experience finance difficulties

Access to finance has a profound influence on a businesses’ capacity to grow and since the GFC major banks have become more risk averse and conservative in their business lending.  This has given rise to Queensland businesses experiencing a range of difficulties including accessing finance on acceptable terms, both in terms of cost and appropriate levels of security.

The RBA has recently examined this issue and has confirmed this is still very much a burning issue for business. The message from their work is that many small businesses find it challenging to access finance. While conditions are better than they were in the period just after the GFC, around one-fifth of businesses report that they have found it relatively difficult to access finance. In addition, the proportion of small businesses that perceive it to be relatively easy to access finance has declined recently.

Unlike larger businesses, small businesses rely heavily on finance from financial institutions for their working capital and new capital expenditure e.g. on machinery, plant and equipment as well as opportunities for overall expansion. Enhancing the capacity of businesses to access finance goes  a long way towards increasing Queensland jobs.

While interest rates on business loans are near historic lows, there continue to be differences between the rates paid by small and large businesses. The spread of interest rates on small business loans relative to the cash rate has remained persistently high since the GFC.  

Small businesses highlighted the following key issues:

  • Access to finance for start-ups is very limited;
  • Banks are reluctant to extend finance without real estate as collateral;
  • The process to obtain finance is lengthy and onerous; and
  • Large businesses continue to impose onerous payment terms.

The banks emphasise that they are keen to lend to small businesses, but that unsecured finance is more costly due to the higher risk involved. There has been more funding available from private equity sources recently, but the supply of venture capital still remains relatively small in Australia compared to elsewhere globally.

Market participants have suggested some initiatives that could potentially improve access to finance for small businesses. In particular, comprehensive credit reporting and open banking are thought to have the potential to lower the cost of credit risk assessment for lenders and increase access to finance.

There are also efforts to improve the financial capability of small businesses, such as by encouraging better financial record keeping. The reliance on real estate as collateral in small business lending could be reduced by making it easier to use other assets as security, such as machinery and equipment.  Initiatives suggested by Market Participants include:

  • Improving the financial capability of small businesses;
  • Providing lenders with better information to make lending decisions;
  • Making it easier to use other non residential personal property as security;
  • Establishing an Australian Business Growth Fund; and
  • Government involvement in the supply of finance for small businesses

Banks have a responsibility to run their businesses in a manner that minimises risks that in turn delivers a profitable and strong foundation for their shareholders.  However Queensland businesses are looking to our lending institutions for offerings that focus on a strong economy as well.  This may be fanciful thought ….. but ultimately financial institutions in my view should have a broader responsibility for economic development in Australia.  This is just one of the many issues currently being played out in the Royal Commission.

Where are the fastest growing areas of Queensland

The Australian Bureau of Statistics has released fascinating statistics relating to the hows and whys of population growth across Australia and Queensland.

Brisbane is back among Australia's fastest-growing cities, according to latest data.  Brisbane's population grew by 48,000 people in 2016-17 to reach 2.4 million - a 2 per cent increase since June 2016 - equal to Sydney and second only to Melbourne (2.7 per cent).  This was the fastest growth rate recorded for Brisbane since 2012-13.

The latest population estimates were the first to include data on the components driving population change in Australia's capital cities and regions – natural increase (births minus deaths), internal and overseas migration.  It is now possible to not only see how much population is changing in an area, but to understand why this change is occurring. In Brisbane, the contribution of each component to population growth was relatively even. Net overseas migration accounted for 38 per cent of population change in 2016-17, compared with 37 per cent from natural increase and 25 per cent from net internal migration.

Key findings for Australian States and Capital Cities include:

  • All states and territories experienced population growth between 2016 and 2017. Victoria had the largest growth in terms of absolute numbers (144,400 people), followed by New South Wales (121,800) and Queensland (79,600). The Northern Territory had the smallest growth (370).
  • Victoria also grew fastest (that is, it had the strongest growth rate), increasing by 2.3%, followed by the Australian Capital Territory (1.7%), New South Wales and Queensland (both 1.6%). The Northern Territory had the slowest growth (0.1%), followed by South Australia and Tasmania (both 0.6%), and Western Australia (0.8%).
  • Melbourne had the largest growth of all Greater Capital Cities (125,400), followed by Sydney (101,600) and Brisbane (48,000). This was the first time on record that Sydney had a population increase above 100,000 people. Together, these three cities accounted for over 70% of Australia's population growth in 2016-17.
  • Melbourne also had the fastest growth (2.7%), ahead of Brisbane and Sydney (both 2.0%).

The fastest and largest-growing area in Queensland in 2016-17 was Pimpama on the Gold Coast, which grew by 3,000 people (31 per cent). Net internal migration was the main driver of this growth, accounting for almost 90 per cent of population change in 2016-17. Other areas to experience large growth included Jimboomba on the southern outskirts of Brisbane, and North Lakes - Mango Hill in the Moreton Bay region, north of the city (both increasing by 2,100 people). Large growth also occurred in Coomera on the Gold Coast and Springfield Lakes, a suburb of Ipswich (both having a population increase of 1,400 people).

More specifically for Queensland:

  • Five of the ten SA2s with the largest population increases (in terms of absolute numbers) were located outside of Greater Brisbane, with three located on the Gold Coast.
  • The SA2 with the largest population increase in Queensland was Pimpama (3,000 people) on the Gold Coast, followed by Jimboomba on the southern outskirts of Greater Brisbane, and North Lakes - Mango Hill in the Moreton Bay region, north of Brisbane (both 2,100). Large growth also occurred in Coomera on the Gold Coast and Springfield Lakes, a suburb of Ipswich (both 1,400).
  • Pimpama was also the fastest-growing SA2 in Queensland (31%). This was followed by Ripley (15%), a suburb of Ipswich, and Newstead - Bowen Hills (10%), in inner Brisbane.

Population density varies greatly across Australia. Australia's population density at June 2017 was 3.2 people per square kilometre (sq km). Among the states and territories, the Australian Capital Territory had the highest population density, at 174 people per sq km, followed by Victoria (28), New South Wales (10), and Tasmania (7.7). The remaining states and territories all had population densities below the Australian figure, with the Northern Territory having the lowest at just 0.2 people per sq km. 

The most densely-populated SA2 in Australia in 2017 was inner-city Melbourne (19,500 people per sq km). The neighbouring SA2 of Carlton (12,100) also featured in Australia's top ten. In Brisbane, Kangaroo Point (6,800 people per sq km) and nearby New Farm (6,500) had the highest population densities.

At the other end of the scale, 205 SA2s in Australia had population densities of less than 1 person per sq km, the majority of which were in Queensland (46 SA2s), Western Australia (41) and New South Wales (37). The Northern Territory had the highest proportion of SA2s with less than 1 person per sq km, at 26%, followed by Western Australia (16%).

All statistics sourced from ABS Catalogue 3218.0

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